The reason for non profits not paying taxes is based on the idea that this is for the public good, that non profits, unlike profit making corporations, have as their basis whatever cause they support, whether it is education, health care, support for the poor, non profits, at least in theory, are supposed to be altruistic, among other things they are a check and balance against the for profit sector of things. Put it this way, a for profit school has every incentive to cheapen up on the education they supposedly give, whereas without the profit motive a non profit is encouraged to spend a lot more (whether this plays out in real life is debatable, some of the big non profits have where 90% of the money donated goes to overhead and seems to be there to pay off a lot of high level employees making pretty sizable salaries).
The government is supposed to ensure that non profits and their endowments actually spend the money, and I think that there could be adjustments where excess money that is not used, that goes back into the endowment, is taxed, likewise perhaps they could encourage better financial aid for the students by taxing money that is used to pay for let’s saying buying a 10 million dollar townhouse for a ‘distinguished’ professor rather than using that for aid to students, and I would have no problem with that, tax code can be a carrot and stick that can achieve goals.
I don’t think we would ever see taxing of non profits, among other things, could you imagine what would happen if they started taxing things like the land and rent that religious groups collect? Trinity Church in NYC is incredibly rich with the NYC real estate they still own, the Catholic Church is one of the largest landlords in NYC, and could you imagine if they started hitting the mega churches? Pastors pay taxes,.but under the IRS code the amount taxed is their income - housing expenses, and some of the mega church leaders have claimed some pretty significany housing expenses against their income…supposedly this was to balance out churches between the rich and poor (a poor church might not be able to house their pastor, so the tax break allowed the pastor to basically live in their own place tax subsidized).
I don’t doubt there are reasonable questions about big colleges and their endowments and I think at the very least there should be tax oversight on how they use their endowment money and modity it so that if a school is sitting on too much cash, or spending money away from the core values of teaching and research and are supporting for example lavish benefits for their employees rather than helping students afford it, their could be legitimate reason to tax such expenditures from the endowment. When I hear about the ‘public right to input’ I cringe, because often that translates into the attitude like colleges and universities should kowtow to popular belief, whether the university is more liberal than the area it is in, religious conservatives wanting the school to tone down certain science teachings to fit their beliefs and so forth, or the idea that somehow a well off school like Harvard somehow is responsible for the lack of educational opportunities in another place in the country, that if we taxed these well off non profits it would pay for others, that simply isn’t true and is more along the lines of 'they got so much money, why should it be tax privileged?" That populist nonsense gets shot down when people aim it at corporations and the well off, and the answer should be that policy towards non profits should be towards achieving the goals we made them tax exempt for in the first place.